AIM hit by sharp liquidity drop in further blow to London market

Companies listed on the UK’s Alternative Investment Market (AIM) have seen the average daily value of their shares trading fall over 15 per cent in the last year, raising serious concerns for the stock exchange.

The figure has been on a terminal decline since the pandemic, falling 44 per cent in the last three years, data from accountancy firm UHY Hacker Young has revealed.

AIM enables the UK’s smallest companies to publicly list, but it has been hit by a host of problems that have driven companies away from it, such as high costs and volatility, as well as the attractiveness of private financing.

A variety of companies have delisted from AIM in recent weeks, with many citing the lack of liquidity on the market as a key factor.

Low liquidity has meant that AIM companies are left with more volatile share prices, making it more difficult to raise finance on AIM.

Meanwhile, institutional investors may be reluctant to build up a substantial holding in AIM companies, without pushing up the price significantly, or divesting from a company without crashing it.

Data revealed by City A.M. last month showed that the number of firms listed on AIM has cratered 30 per cent from 1,104 to just 742 since 2015.

Meanwhile, a total of 76 companies delisted from AIM in the last year, up 62 per cent from the 47 delistings in the previous year.

Colin Wright, partner and group chair at UHY Hacker Young, argued that the government needs to be looking at what it can do to encourage investment in AIM, such as introducing lower capital gains tax rates.

“The London Stock Exchange could also look at renewed marketing campaigns to highlight the key benefits offered by AIM to investment grade companies and to investors,” Wright said.

Average daily AIM trading hit £443,996 in between 2021-2022, easily exceeding an average of £400,000 traded annually during the pandemic, before falling to just under £300,000 in 2022-2023.

Now, that number is only £248,990.

This is partially due to UK investors increasingly being attracted to the high-performing Magnificent Seven in the US, with companies like Nvidia and Microsoft frequently being the most traded stocks by UK retail investors.

Meanwhile, AIM’s flagship companies like Boohoo and Fever Tree have fallen in popularity, with their stock prices falling 86 per cent and 62 per cent respectively over the last five years.

“Whilst AIM remains a key trading platform for many investors, the recent drop in its liquidity shows that more needs to be done to help keep UK stock markets as attractive trading and investing venues,” added Wright.